Question

When a consumer purchases a new computer, how is that purchase counted in GDP?

A) By adding the value of the various components of the computer to the final price paid for the computer by the consumer.
B) By subtracting the value of the components from the price paid by the consumer.
C) By counting only the value of the computer and ignoring the value of the components.
D) None of the above. The production and sale of the computer would not be counted in GDP.

Answer 1

The purchase of a new computer by a consumer contributes to GDP by counting only the value of the final good (the computer), while excluding the value of its components to avoid double counting. Option C is correct.

Step-by-step explanation:

When a consumer purchases a new computer, the purchase is counted in GDP by counting the value of the final good, which is the computer itself, not by adding the value of the various components (choice A) or by subtracting the value of the components (choice B).

This is because GDP measures the total dollar value of final goods and services sold for consumption, investment, government, and trade purposes. Intermediate goods, or the components that go into producing other goods, are excluded from GDP calculations to avoid double counting. Therefore, the correct answer to the question is C) By counting only the value of the computer and ignoring the value of the components.